Trump's economic threats against Iran trigger slump in US markets

President Donald Trump warned on his Truth Social platform that Iran would face "economic warfare and isolation on an unprecedented scale" and threatened secondary sanctions on any country or company doing business with Tehran. Treasury Secretary Scott Bessent later said the administration could impose additional sanctions on foreign firms that trade with Iran.

The announcement came as the Strait of Hormuz remained largely closed, limiting Gulf oil shipments and pushing global crude prices toward a one-month high, with Brent crude around $93 a barrel and US crude near $86 a barrel. US equity markets reacted sharply; the Dow Jones fell 703.84 points (1.32%) to 52,759.21 and the S&P 500 slipped 0.87% to 7,641.16, marking the worst three-week performance in recent months.

Bond yields also rose, with the 30-year Treasury yield climbing above 5.25%, close to a two-decade peak, as investors shunned long-dated US debt. Treasury officials responded by doubling buybacks of long-dated bonds to at least $4 billion, but the move did not stabilize markets.

Analysts noted that the closure of the strait keeps oil prices elevated, contributing to U.S. inflation and putting pressure on the bond market. The U.S. Department of the Treasury reported that total federal debt exceeded $40 trillion for the first time, accelerated by war-related spending and recent tax cuts.

Iran dismissed the threats as a diversion, while the United Arab Emirates imposed an indefinite embargo on Iranian trade following missile accusations. US Senator Mark Warner criticized the ongoing conflict, and a Reuters/Ipsos poll showed Trump’s approval rating at 33%, the lowest of his presidency.